FORTY-EIGHTH REPORT
The Committee of Public Accounts has agreed to the following Report:
DEPARTMENT FOR INTERNATIONAL DEVELOPMENT: PERFORMANCE MANAGEMENT—HELPING TO REDUCE WORLD POVERTY
INTRODUCTION AND LIST OF CONCLUSIONS AND RECOMMENDATIONS
- Eliminating poverty is one of the greatest challenges facing the world. With over 1 billion people having to survive on less than $1 a day, the aid they receive must be well spent. Knowing what is effective in reducing poverty; understanding the conditions which help aid to succeed; setting appropriate targets which motivate those involved in development; and being able to identify progress or the lack of it are therefore important factors in the fight against poverty.
- The Department for International Development (the Department) lead the United Kingdom's contribution to global efforts to tackle world poverty. Under internationally agreed targets, the aim is to halve by the year 2015 the number of people living in extreme poverty. The Department provide aid in two main ways: bilateral programmes undertaken directly with individual countries and multilateral programmes run by organisations such as the European Union and the World Bank. In 2000-01, the Department spent £1.4 billion (50 per cent of their total expenditure of £2.8 billion) on bilateral aid and £1.3 billion (46 per cent) on multilateral aid.[1]
- The Department are recognised by their peers and by developing nations as having a leading role in international development. At the same time they face challenges common to all international development organisations, particularly the numerous factors that can influence development results, and the difficulty of measuring achievements.[2] Against this background and, on the basis of a Report by the Comptroller and Auditor General,[3] we examined how successful the Department have been in meeting their objectives. As a result of this examination we make five main points:
- The Department should provide aid in ways, and in countries, which reflect more closely research on aid effectiveness. Countries with large numbers of very poor people and governments committed to poverty reduction benefit most from external aid. In addition, aid provided to support poor countries' own strategies for tackling poverty, and integrated with their governments' budgets has a more sustainable effect than supporting stand-alone projects. The Department have made progress in targeting their bilateral aid on the poorest countries, with increasing use of 'budget support'. But in 2000-01, 22 per cent of the Department's bilateral aid went to countries which, although they contained pockets of severe deprivation, were not poor countries overall and where aid could indirectly subsidise non-development activities.
- The Department cannot ensure that the aid they provide through multilateral organisations is best applied to reduce poverty. In 2000-01, the Department provided £1.3 billion (46 per cent of their total aid budget) to organisations such as the European Union and the World Bank. But the Department have little direct control over how multilateral development organisations use these funds. The Department aim to influence how and where these organisations provide aid, but they have not yet succeeded in achieving their target of increasing the proportion of European Union aid which goes to poor countries.
- The Department need to adopt performance targets against which they can measure their performance in reducing poverty. The Department operational staff have had either little knowledge of the Department's first two Public Service Agreements and associated priority performance targets or did not see them as key influence on their work. The short timescale of the targets has not fitted well with the slower emergence of evidence for development results. And targets have not been well structured to offer a balanced coverage of the countries and activities which the Department support. The next set of targets needs to take account of the way the Department manages their operations.
- When planning their country programmes the Department do not quantify the poverty reduction they expect to achieve, and so cannot be certain that aid resources are being used cost-effectively. Programmes for helping to reduce poverty in individual countries are the main way in which the Department commit their bilateral aid. But the Department's country plans have lacked targets against which to measure progress; and have not identified the links between the resources allocated and the contribution they will make to reducing poverty.
- The Department should give greater attention to evidence of poor governance and its effect on the aid they provide. The Department have carried out a number of governance assessments in recent years on individual countries. But they have not systematically assessed the quality of governance when drawing up plans for each of the countries in which they provide aid. The Department need to take a broad view of evidence on the quality of governance arising from all sources, including that relating to other donors' programmes or from local press reports or court proceedings.
- Our more specific conclusions and recommendations are as follows:
Aid needs to be provided in ways which are
most effective in reducing poverty
- The European Union does not make poverty reduction a priority
when choosing which countries to aid, but in 2000-01 it
received 55 per cent of the Department's £1.3 billion multilateral
aid budget; a level of funding which is largely outside
the Department's control. As a result, only 38 per cent
of European Union aid went to poor countries in 2001 compared
with 50 per cent in 1998 and the target of 55 per cent which
the Department have been urging the European Union to achieve
by 2002. This significant slippage threatens to undermine
the effectiveness in reducing poverty of more than half
of the Department's multilateral aid budget. We endorse
the Department's commitment to work with the Foreign Office,
the Treasury, other Member States and the international
aid community to change European Union policy on aid to
ensure that the United Kingdom's contributions are used
as effectively as possible to reduce poverty.
- Only 2 out of 23 key targets in the Department's current
Public Service Agreement address directly the effectiveness
of their multilateral aid. Moreover, the strategies the
Department have adopted towards individual multilateral
organisations do not establish performance indicators to
measure those organisations' effectiveness. In order to
clarify their reasons for channelling aid through agencies
beyond their direct control, whose main objective may not
be poverty reduction, the Department need to identify indicators
by which they can assess the poverty reduction performance
of these organisations, as well as measures designed to
show whether the Department are having the desired influence
on the policies and practices of these organisations.
- The Department provide aid to countries which are not
poor but which contain pockets of severe deprivation. These
countries could do more to support their own poor if they
chose to, and there is a risk that they could use external
aid in order to free resources to fund non-developmental
activities. The Department need to demonstrate that they
have properly assessed the relative merits of such aid against
competing demands from poorer countries.
The Department need targets which promote cost-effective
aid and give a fair view of their performance
- The Department, like all other main government departments,
are required to set out their aims, objectives and targets
in a Public Service Agreement against which performance
is monitored. The Department's Agreement is built around
helping to eliminate poverty in the poorest countries. They
need these targets to provide a sharp focus on their priorities.
But the current three-year targets do not sit well with
the longer periods needed for development results to emerge,
and provide only limited coverage of the range of the Department's
activities or countries aided. The Department would rightly
prefer their next Public Service Agreement to have a longer
time frame and be more closely tailored to pursuit of the
Millennium Development Goals.
- Performance against many of the Department's Public Service
Agreement targets reflects not only the Department's work,
but also the work of other donors and global economic factors.
The Department consider that it is possible to establish
plausible associations between their work and changes in
the levels of poverty over time. It is difficult to isolate
the Department's performance in reducing levels of poverty,
however, and sometimes such associations are tenuous or
difficult to make. The new target regime needs to be supported
by a clear definition of the arrangements for monitoring
progress towards them, and for deriving a fair and balanced
view of the Department's contribution.
- The Department's ability to provide a reliable view of
their performance has been constrained by the poor quality
of data they have had to use to measure progress against
their Public Service Agreement targets. They are working,
both internationally and within individual countries, to
address the poor state of statistical systems in many poor
countries. When designing quantitative targets for their
next Public Service Agreement, the Department should confirm
that targets will be supported by data of sufficient quality
and timeliness before those targets are formally adopted.
- The Department are failing to make the most of their evaluation
studies to influence the design of aid projects and programmes
because at project level, the results have not become available
in time and few formal evaluations have related to country
programmes. The Department plan to make their evaluations
more relevant and timely. They need to evaluate their country
programmes as a whole, and ensure that the results can inform
reviews of spending and aid strategy. Where possible, the
Department should undertake joint evaluations with other
major donors to those countries.
The Department need to improve how they
assess the prospects of reducing poverty
- The planning of aid programmes for individual countries
is the Department's main tool for choosing where and how
to provide aid. But the resulting country strategies have
often been insufficiently precise to inform decisions on
the ground, and have not usually contained quantified poverty
reduction targets. So the Department have not been able
to analyse the degree of poverty reduction which could be
expected to result from the resources they were planning
to commit in a particular country. Future country planning
needs to address these issues if it is to provide a proper
basis for decisions on the use of aid resources - between
countries as well as within them - and to secure the greatest
possible reduction in poverty.
- A poor country can receive aid from more than 100 different
donor organisations. Many poor countries do not have the
administrative resources to deal with a large number of
donors. Subject to an appropriate quality of governance,
the Department have increasingly used budget support as
a means of giving aid, which reduces administrative burdens
and promotes national ownership of development programmes.
They should also seek other ways of reducing the burden
on developing countries, such as sharing expert personnel
between donors.
THE DEPARTMENT
SHOULD PROVIDE AID
WHERE AND HOW
IT CAN BE
MOST EFFECTIVE IN
REDUCING POVERTY
- The approach of donor countries to the provision of aid has
changed over the last 20 years. Strong state-domination was
replaced in the 1980s by a more market-orientated view, while
in the 1990s some state involvement was considered essential
if aid was to be effective. Recent research has concluded that
monetary aid is most effective when allocated to the poorest
countries, especially those with governments which support poverty
reduction. Over the last ten years, donors have also realised
the importance of supporting countries' own strategies for reducing
poverty rather than imposing their own—a focus on providing
what a country needs rather than on what donors can readily
deliver.[4]
- Figure 1 shows that the Department provide substantial funding
to a number of multilateral organisations. Such funding is not
always at the Department's discretion. Most of the Department's
funding to the European Union, for example, is based on budgeted
costs for the Union's aid programme, which are decided by the
Council of Ministers and the European Parliament. The Department
do not have direct control over the use of multilateral aid.[5]
They told us that they have tried instead to influence how multilateral
organisations worked but with mixed success. They have fared
much better with the World Bank and the United Nations Development
Programme, with whom they have worked to help redesign the organisations'
poverty reduction strategies, than they have with the European
Union.[6]
Figure 1: The Department's contributions to
multilateral development institutions, 2000-01 (total £1.3 billion)
Source: National Audit Office (2002), Department
for International Development: Performance Management - Helping
to Reduce World Poverty (HC 739, Session 2001-02), Figure
14.
- The Department have a target to increase the proportion of
European Union aid going to poor countries from 50 per cent
in 1998 to 55 per cent in 2002. By the end of 2001, however,
the proportion of Union aid going to poor countries had slipped
to 38 per cent, with the remainder going to middle-income countries
such as in North Africa, Latin America and parts of Eastern
Europe. The slippage occurred because many Member States believe
that aid should support foreign policy interests as well as
poverty reduction, hence the greater focus on middle-income
countries. The Department are actively involved with the Foreign
Office and the Treasury in building up support from Member States
who share the United Kingdom view that the prime purpose of
aid is to reduce poverty, including working with the Foreign
Office and the Treasury during their own negotiations in the
European Union. The Department have also worked to promote this
view of aid through other influential international bodies such
as the Organisation for Economic Co-operation and Development.[7]
- While the Department recognise the importance of multilateral
aid, they cannot easily measure the effectiveness of the funding
they provide to multilateral agencies. Although 46 per cent
of DfID's aid budget goes on multilateral aid, only two of 23
key performance targets are focused on measuring how well such
aid is used. The Department told us that the predominance of
targets focused on bilateral aid was a reflection of the need
to get the right balance between targeting activities over which
they had direct control and targeting the funding where they
had to rely instead on influencing performance.[8]
To underpin their funding of multilateral aid, the Department
have developed strategies for influencing these international
organisations and helping to improve their effectiveness. These
strategies have included seconding staff from the Department
to work within these organisations and building coalitions of
support for the direction the Department wanted them to take.
But the strategies have lacked any detailed performance measures
or targets with which to measure the Department's success in
achieving their objectives.[9]
- Despite promoting aid to poor countries as the most effective
means of reducing poverty, nearly a quarter of the Department's
bilateral aid (£233 million) was given to better off countries
in 2000-01.[10] The
Department explained that although such 'middle-income' nations
could not be described as poor, they did contain pockets of
severe deprivation. These countries, however, often have substantial
non-development public sector budgets, which creates a risk
that aid from the Department and other donors could indirectly
subsidise non-development related expenditure. The Department
seek to mitigate this risk by concentrating their aid in parts
of such countries where poverty is most severe; working with
partners running programmes which are targeted at reducing poverty;
and discussing the composition of governments' own public expenditure
to try and achieve a greater focus on poverty reduction. The
Department's main achievement in these countries is through
influencing the attitudes of governments, leading to changes
in such areas as economic policy, which can create far-reaching
benefits for the poor.[11]
- In 2000-01, the Department provided aid directly to more than
140 countries but managed the programmes themselves in only
about 60. The amount of bilateral aid provided to many countries
is small, with over 100 countries receiving less than 10 per
cent of the Department's total. This breadth of coverage brings
with it a danger of dissipating aid effort and generating high
administration costs. The Department agreed that they needed
to focus on a smaller number of countries where their aid could
make a real impact. They have therefore chosen a small group
of countries around which to focus targets on improving the
effectiveness of education and health care assistance.[12]
Where the Department do not manage the programme, aid is often
provided via non-governmental organisations, such as aid charities,
which received a total of £184 million from the department in
2000-01. The Department have largely pulled out of some parts
of the world, such as the Pacific region, where their programmes
were very small with high administration costs; and where other
donors already had much larger programmes in the area.[13]
- The Department recognise the need to control their administrative
costs, some £77 million in 2000-01.[14]
They are doing more to support government budgets rather than
discrete projects, which tend to be extremely costly in administrative
terms. They have also established agreements with some of the
larger non-governmental organisations with the aim of reducing
their overhead costs. Under these arrangements the organisations
have received funds without the Department continually checking
their use of the money, once their controls on expenditure have
been assessed.[15]
1 C&AG's Report, para 1.7 Back
2 ibid, paras 4, 3.36-3.37; Qs 139, 172 Back
3 C&AG's Report, Department for International Development: Performance Management - Helping to Reduce World Poverty (HC 739, Session 2001-02) Back
4 C&AG's Report, para 2.14; Q148 Back
5 C&AG's Report, para 4.9; Ev 24; Qs 3, 101, 159-163 Back
6 Q2 Back
7 C&AG's Report, Figure 8; Qs 5, 47, 50-51, 53, 123-129 Back
8 Q3 Back
9 C&AG's Report, paras 2.23, 2.26; Q2 Back
10 C&AG's Report, para 2.19; Q32 Back
11 Qs 58, 135-137, 184 Back
12 C&AG's Report, para 4.25; Q32 Back
13 DfID (2001), Statistics on International Development 1996/97 - 2000/01 (Figure 14); Qs 32, 105, 107 Back
14 DfID, Departmental Report 2002: The Government's Expenditure Plans 2002-03 to 2003-04, Cm 5414 (Table 6, p108) Back
15 Qs 36-39 Back
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